SP Trader Fund's investment philosophy strives to achieve maximum growth of capital (asset management and wealth management) within defined financial risk management limitations. To meet these targets, SP Trader Fund employs a portfolio of objective, technically-based trading systems and a multidimensional diversification strategy which allots capital to different trading strategies and time frames.

The selection of component strategies and time frames follows a rigorous quantitative analysis that considers the liquidity and volatility of markets traded, types of strategies employed, trade duration, risk of loss and probability of achieving performance objectives.

These factors, along with measures of correlation between the system components, attempt to ensure synergy at the portfolio level while limiting financial risk by maintaining diversification across multiple dimensions. We believe our philosophy of diversifying among time frames and strategies sets SP Trader Fund apart from the bulk of advisors who diversify amongst market sectors only.

The resulting multi-dimensional approach gives SP Trader Fund the ability to achieve financial success in virtually any environment, be it rising or falling markets, quick or long term moves, or trending versus oscillating markets. Proper financial risk asset management conserves and increases wealth.

 

With interest rates at historic lows and stock market valuations remaining high, returns from traditional investments in stocks and bonds are likely to be below average for the next several years.

The allure of alternative financial investments lies in their ability to provide absolute returns regardless of conditions such as a strong economy, low inflation, or a bullish stock market. Indeed, one of the key benefits of an investment in futures is this ability to profit in virtually any economic environment- in our view proper wealth management.

Not surprisingly, the amount of asset management allocated to alternative financial investments has increased dramatically over the past several years as investors search for alternatives to the stock and bond markets.

 

While many alternative investments are really no more than alternative strategies within an existing asset class, managed financial futures provide diversification into a true alternative asset management class through exposure to the Markets as a whole.

Venture capital, private equity, mutual funds and many hedge funds are actually an extension of a part of the equity class, not the asset class as a whole. SP Trader Fund utilizes futures on stock indices and financial instruments such as bonds and currencies which remain diversified by using a multi-dimensional approach comprised of lowly correlated strategies across different time frames and logics.

 

With global economies now wound together ever tighter, it has become increasingly difficult to achieve adequate diversification and wealth management with conventional stock and bond portfolios alone. One way to diversify is to allocate a portion of capital to assets that are intrinsically uncorrelated by utilizing alternative investment strategies. SP Trader Fund employs the foregoing approach - Trading financial futures that encompass a broad range of strategies.
The table below shows the correlation of an SP Trader Fund investment with various benchmark indices. Low correlations with all of the benchmarks reflect the uniqueness of SP Trader Fund's multidimensional diversification approach.

The low correlation with the managed futures index highlights how SP Trader Fund's multi-dimensional strategy stands apart from the typical trend-following approach used by most futures and money managers as well as mutual funds.

 

 

A study published by the Chicago Mercantile Exchange concluded that portfolios with as much as 20% of assets in managed futures yielded up to 50% more with comparable risk than portfolios of stocks and bonds alone. The "Impact of Incremental Additions of Managed Futures to the Traditional Portfolio," as described by the Chicago Board of Trade, shows that a traditional portfolio (55% stocks, 45% bonds, and 0% managed futures- a typical mutual funds mix) presents an investor with the greatest risk and lowest returns. However, a portfolio comprising 45% stocks, 35% bonds, and 20% managed futures offers an investor the greatest financial success and least amount of financial risk.

The figure below shows the possible effects of allocating varying percentages of an SP Trader Fund investment to a traditional portfolio of stocks and bonds.
The ratio of mean annual return to the standard deviation of returns is a widely used measure of financial risk versus financial reward, and assumes risk equals the volatility of returns.

The chart shows significant improvements in portfolio efficiency are gained by allocating funds to an SP Trader Fund investment. The optimal allocation for this hypothetical portfolio would be 42% Stocks, 28% Bonds, and 30% SP Trader Fund.

 

Understanding how diversification into alternative assets or strategies affects a portfolio's bottom line is critical to consistent financial growth and financial success.

The benefits of diversification are often overlooked in good times, but become painfully clear in bad times. As we saw in the recent bear market in US stocks, when things go bad, conventional portfolios can suffer greatly.

Alternative financial investment vehicles can provide protection during bear markets in stocks and bonds due to their low correlation with these financial investments.

The benefits of an SP Trader Fund investment on an investor's overall portfolio performance is illustrated in the figures and table below, comparing a traditional stock and bond portfolio (such as mutual funds) to one containing a 25% allocation to SP Trader Fund (although 30% would be optimal).

 

 

The portfolio with a 25% allocation to SP Trader Fund shifts the distribution of returns significantly to the right and shows less frequent losing months with smaller losses.

The table below shows the average monthly loss is 0.78% smaller for the portfolio containing an SP Trader Fund investment, which represents average annualized bear market protection equal to 9.4%.
Furthermore, the frequency of losing months drops from 47% to only 23% and the average profit for all months is 3.9% higher on an annualized basis for the portfolio containing an SP Trader Fund investment.

 

Portfolio including SP Trader Investment

 

MULTI-STRATEGY INVESTMENT HEDGE FUND

MEAN ANNUAL RETURN: 72%

TOTAL TRACK RECORD: SINCE JAN 2000

24 MONTH SIMPLE RETURN ON CAPITAL: 248%

MINIMUM INVESTMENT: $6,250 PER 1 UNIT

NUMBER OF INVESTMENT PRODUCTS: 2

ANNUAL STANDARD DEVIATION: 13.0

ANNUAL SHARPE RATIO: 5.53

SORTINO RATIO: 7.26

SKEW (MONTHLY): 0.59

KURTOSIS (MONTHLY): 0.53

MEAN P/L/MO: 5.991

STANDARD DEVIATION PL/MO: 3.756

SKEW ADJUSTED DOWNSIDE STANDARD DEVIATION/MO: 2.86

MAXIMUM DRAWDOWN%: -1.6

MAXIMUM DRAWDOWN DURATION, MONTHS: 1

* This Summary Description applies to the Investment Futures Growth Fund Product.

 

SP Trader Fund is not satisfied making blanket warnings to clients regarding the uncertainty involved in projecting future results from past actual performance.

We believe measuring uncertainty in future performance is critical to making informed investment decisions before putting hard - earned money in harm's way (proper wealth and asset management). The actual trades history in SP Trader Fund's portfolio strategy involve over a thousand trades, allowing estimates of Confidence limits* on performance at a given level of probability.

Performance metrics corresponding to lower and upper confidence limits are shown below, representing levels below or above in which there is less than a 5% probability of occurrence based on past results.

The figures below shows a compounded equity curve for an SP Trader Fund investment with brackets representing upper and lower confidence limits. Respectable performance even at the lower confidence limit indicates that there is a high probability of investment success, though there is no guarantee of such success.
Most fund managers and mutual funds cannot provide this information to clients. As a result, there is a very real danger that favorable historical results are merely lucky spikes within a very diffuse probability distribution that may even extend to negative territory.

 

 

 

The past has shown that an investment in the Fund is a financial asset in a client portfolio in difficult economic environments. The past has also shown that the Fund can compensate for downturns in world equity markets with positive and successful financial performance.
Investors have found that they can receive substantial financial returns by Subscribing to the SP Trader Investment Futures Growth Fund.

If you have any queries, comments or suggestions, please don't hesitate to Email us.

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